Rajendra Jadhav and Aftab Ahmed

NEW DELHI (Reuters), Several Indians are cutting back on fried food, and even vegetables. The Ukraine conflict has inflated prices for everything from fuel to edible oils. It threatens a slow recovery of the consumption-based economy that was hampered by COVID-19.

Asia’s third-largest country is experiencing the effects of a cost increase. Companies are passing on the costs to consumers, who have been fighting the first increases in diesel and petrol prices in five years, plus more expensive vegetable oil.

Indrani Majumder said, “God only know how we will handle this price rise.” She was the sole earning member of a family with four members in Kolkata’s eastern city.

She said that her family now eats more cooked food in order to cut down on oil costs. This is only one example of the many homes where people claimed they are taking similar steps.

India’s economy increased at a slower rate than was expected during the quarter October-December. However, economists expect a decrease in current growth as higher fuel prices will cause an inflation spike.

Graphic: India’s inflation above central bank’s tolerance level: https://graphics.reuters.com/INDIA-INFLATION/INDIA/egvbklgkdpq/chart.png

At nearly 60%, private consumption makes up the majority of Gross Domestic Product.

However, Indian companies have increased the prices of key products like milk and instant noodles by roughly 5% to 20% since February’s invasion, Russia calling it a special operation.

Around 800,000,000 people of nearly 1.4 Billion received food staples from the government during the pandemic. Small price hikes can have a serious impact on their income.

Pronab Sen was formerly India’s chief statisticsian. He warned that families’ financial health could remain poor for the third consecutive year.

“The rebuilding of savings is only the beginning after the pandemic,” said he. This shock will force them to reduce consumption.

DARKENING PICTURE

Companies in India, which is an import-dependent country, have increased retail prices for petrol and diesel by two times this week due to the rising global crude prices. India imports nearly 85%, which is why prices for petrol and diesel have increased by almost 50% so far this year.

This South Asian country is the largest importer of edible oils in the world, importing nearly 60% of its oil needs.

The price of palm, the nation’s most commonly consumed edible oil has increased by 45%. Also, the supply of sunflower oils, which Russia and Ukraine produce in great quantities, has been affected.

Wholesalers claimed that their edible oil sales have fallen 25% in the last month due to rising prices.

These factors allowed India’s retail inflation to remain above the comfort level at 6% in February, while wholesale rates were higher than 13%.

Jefferies, a financial services company said that the timing of inflation in input prices could not be worse given a slower consumption trend.

The central bank stated that it monitors commodity and crude oil prices in advance of the April monetary policy meeting. Markets don’t expect the Reserve Bank of India (RBI) to alter key rates. It is looking to prioritize growth.

This is in contrast to global central banks that have raised rates, or are considering whether they should do so to reduce inflation. This week, the U.S. Federal Reserve’s policymakers called for large rate hikes in May.

Consumers are not likely to find any relief.

According to Confederation of All India Traders, input costs for manufacturers of consumer durables (FMCGs) and fast-moving consumer goods will rise by 10% to 15% as fuel prices rise. This expense is expected to be passed onto the end consumer.

Vegetable vendor Debashis Dahara in Kolkata stated this week that rising transport costs could cause vegetable prices to rise by an additional 5%. Since February, his sales had already fallen by half.

India’s Mother Dairy raised milk prices by almost 5% in March, and FMCG companies like Nestle and Hindustan Unilever (NYSE 🙂 are increasing their charges for instant noodles and tea.

The prices of broiler chickens have shot up nearly 45 percent in the past six months to an all-time high of 145 Rupees ($1.90 per kg) after import restrictions from the Black Sea.

Since Russia, which is one of the largest producers of fertilisers, sent tanks and soldiers to Ukraine, fertilizer prices have risen to an all-time high of $150 per tonne.

Archana Pawar, an Indian housewife living in Mumbai’s financial capital, stated that managing her monthly budget has become difficult. This price increase is forcing us all to reduce our consumption.

($1 =76.1150 Indian Rupees